El Salvador to strengthen fiscal management and promote inclusive growth with IDB support

US$350 million financing will support measures to strengthen public spending management

El Salvador will strengthen its fiscal management and protect public investment and the financing of social programs to promote inclusive growth with help from a US$350 million policy support program from the Inter-American Development Bank.

The program, the first operation of a policy-based loan, will support the design of legislation, rulings, and other reform implementation actions in the fiscal area. It will also assist the enactment of a Fiscal Responsibility Law (FRL), a Medium- and Long-Term Fiscal Framework, and fiscal rules and other mechanisms to help improve government management of expenditures and debt.

The program will also strengthen the institutional capacity of the public procurement and pension systems, as well as of the Budget by Results, the Medium-Term Expenditure Framework, the public investment system, tax collection and transparency management.

The IDB financing falls within a framework of longstanding technical assistance to reforms implemented by the government of El Salvador to strengthen its fiscal stance. These reforms –including the implementation of FRL and changes to the Savings and Pensions System– have received IDB technical assistance all the way from their initial design stage to the development of regulations and implementation.

The loans for the IDB-approved program are for a 20-year term, with a 5.5-year grace period and a LIBOR-based interest rate.